Saks Global declares bankruptcy. What does it mean for shoppers?
“There has been a transformation in retail,” one expert said.
Saks Global – the parent company of Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman – filed for bankruptcy protection on Wednesday, marking a low point for the nation's biggest luxury department store conglomerate.
The firm filed for Chapter 11 bankruptcy, which indicates a need for new ownership as debt impedes operations. Stores will remain open, but some locations may shutter as part of the reorganization.
"This is a defining moment for Saks Global, and the path ahead presents a meaningful opportunity to strengthen the foundation of our business and position it for the future," Saks Global CEO Geoffroy van Raemdonck, who took the position on Wednesday, said in a statement.
An overlapping set of factors led to the bankruptcy, some analysts said: A debt-fueled acquisition of Neiman Marcus, the rise of online purchases, direct-to-consumer sales outside department stores and a waning appetite for sky-high luxury prices among some shoppers.
“There has been a transformation in the retail environment,” Vanitha Swaminathan, a professor of marketing at the University of Pittsburgh, told ABC News.
Here’s what the Saks Global bankruptcy means for U.S. shoppers.
What drove Saks Global to bankruptcy?
Saks, the iconic 159-year-old company synonymous with luxury style, faced a shifting business landscape in recent years along with many of its department-store competitors, some analysts said.
Online shopping made it easier for customers to directly purchase goods from preferred brands, instead of seeking out luxury handbags or jewelry at department stores. Meanwhile, social media influencers helped customers find options that previously may have been discovered on the shop floor, Barbara Kahn, a professor of marketing at the University of Pennsylvania, told ABC News.
“There’s been growth in e-commerce -- a different way for people to shop,” Kahn said. “A lot of the big luxury brands have gone direct to consumers.”
Alongside those alternative shopping avenues, prices soared for luxury goods, causing some middle-income customers to think twice about splurging on products with little apparent improvement in quality, Marie Driscoll, a professor at The New School who studies luxury retail, told ABC News.
“Over the last five years, luxury prices have gone so high that there’s really a question of perceived value,” Driscoll said. “People are thinking, ‘This is not worth it.’”
Such trends set the stage for a devastating misstep at Saks Global, analysts said.
The firm opted to acquire Neiman Marcus in late 2024 in a $2.6 billion deal funded by debt. In an effort to pay off the debt, Saks Global altered its agreements with vendors, moving to take in a larger share of the proceeds from sales, Driscoll said.
Some vendors, Driscoll added, cut back on their supply of goods provided to Saks Global-owned stores, which limited the offerings on its shelves and hurt business.
“Saks didn’t have the merchandise customers wanted, and customers went elsewhere,” Driscoll said.
What does the Saks Global bankruptcy say about shoppers?
Saks Global filed for bankruptcy on the same day fresh monthly sales data showed stronger-than-expected U.S. retail sales. Sales climbed a robust 0.6% in November, accelerating from the previous month, U.S. Census Bureau data found.
Sales at U.S. department stores shrunk, however. Over the past year, department-store sales fell 1.5%, well below overall sales growth of 3.3% over the same period.
Consumer spending accounts for about two-thirds of U.S. economic activity.
The disparity between resilient consumer spending overall and sluggish performance at Saks Global reflects industrywide pain across department stores, as well as a growing divide between affluent and lower-income shoppers, some analysts said.
“That ultra-luxury segment has gotten more appealing to consumers at the high end,” Swaminathan said. "The middle-of-the-road, slightly-above-average-income consumers may be trading down.”
Related Topics
Popular Reads
ABC News Live